Court rules Honda staff entitled to higher pension benefits

Honda’s UK manufacturing employees could be entitled to a higher scale of pension benefits, after the Court of Appeal upheld a High Court decision.

The organisation faces additional pension liabilities of between £47 million and £70 million following the decision, which ruled that an agreed lower benefit structure for Honda UK’s defined benefit pension scheme was not properly implemented when it extended employee membership in 1986.

The scheme had initially provided benefits to employees of Honda Motor Europe since 1973 with a 1981 deed, which established the non-contributory defined benefit pension structure.

However, Honda’s subsidiary, Honda of the UK Manufacturing (HUM), staff were given the right to join the scheme on an alternative lower benefits level five years later.

While the specific benefits were communicated to HUM employees, no reference of these changes was formally added to the 1986 Deed of Adherence.

It was only added to the scheme’s governing documents in 1998, creating a 12-year period in which Honda was at risk of funding the higher-value benefits.

The organisation was asked to interpret the deed as a reference to the HUM benefits scale. The court decided that, although the deed allowed HUM employees to participate in the scheme, it only referred to the pre-existing (more valuable) benefits.

The Court of Appeal agreed and Lord Justice Lewison said: “In my judgement, nothing has obviously gone wrong with the language of the Deed of Adherence.

“What may have gone wrong was that those charged with implementation overlooked the need for a separate exercise of the power of amendment.”

A Honda spokesperson said: “Honda Motor Europe accepts the ruling. However, it is clear from the judgement that the Court of Appeal considered there are other legal avenues open to the organisation.

“Honda Motor Europe will investigate these in order to remedy the error.”

Justin Briggs, a partner at law firm Burgess Salmon, added: “In order to establish whether something had gone wrong with the Deed of Adherence, it would have been necessary to investigate facts outside the document, straying outside the limits of a construction claim into the territory of rectification.

“Without further application by the organisation, steps will now have to be taken to amend the administration of the scheme to give effect of the judgement.”